Airlines could sue over ash cloud shutdown - Cubism Law Consultant Dan Hyde Comments

Published on 21 Apr 2010 under category: cubism

By Dan Hyde, Consultant at Cubism Law

As published on Reuters, US, 21 April 2010

London/Frankfurt, April 21 (Reuters)

European airlines could sue government agencies for grounding air traffic due to safety fears over a volcanic ash cloud if they are not compensated for losses by their own countries, some lawyers said.

Lawyers believe airlines, which industry body IATA says have lost $1.7 billion in the crisis, could bring lawsuits against government agencies, including bodies such as Britain´s National Air Traffic Services (NATS), which played a crucial role in closing the skies around the United Kingdom.

Jeff Zindani, a managing partner, at UK solicitors Forum Law told Britain´s Daily Telegraph he expected to see "a raft of class actions brought by airlines and companies" against government agencies if a compensation deal was not agreed, the damages from which could "break the billion pound mark".

A spokesman for global law firm DLA Piper said it was advising a client on the issue but would make no official comment on the matter.

The European Union´s (EU) competition chief said the European Commission may allow EU governments to give aid to airlines hit by losses but if that does not happen carriers will likely look at other ways to recoup lost cash.

Europe´s skies were re-opened on Wednesday after the continent was cut off from most of the world for five days due to an ash cloud from an Icelandic volcano that spread over northern Europe, stranding millions of travellers and paralysing businesses.

Some lawyers said a case against government agencies would be hard to prosecute.

"You would have to establish that there was a duty of care owed by bodies like NATS but they would say they are just providing the best available information in good faith so it would be difficult," said Dan Hyde, a solicitor at London´s Cubism Law.

James Healy-Pratt, a partner at London´s Stewarts Law believes aviation authorities acted "prudently" and there was "little prospect of any recourse" against them, adding that airlines would be covered against actions by travellers.

"EU law governing flight cancellation and delays limits what recourse passengers have against airlines," said Healy-Pratt.

Alex Bristol, general manager of Strategy and Investment at NATS, told Reuters Insider the agency did not expect any legal action. "I´m not aware of any (legal action against NATS) and I don´t anticipate such either because I think we´ve been really clear from the start that all decisions have been made both in line with guidelines and also we´re with the safety of the UK airspace in mind," Bristol said.

9/11 Compensation Precedent

German airline Lufthansa said it would not apply for compensation but British Airways, which has lost around 100 million pounds in revenues because of the crisis, called on the EU and national governments to compensate airlines to help them cope with the impact the shutdown.

The British carrier added that compensation was paid after the closure of U.S. airspace following the 9/11 attacks and that the impact of the current situation was "more considerable."

Joachim Hunold, chief executive of Germany´s second-biggest carrier Air Berlin, said he could not rule out seeking compensation if the situation was comparable to 9/11. "After 9/11 there was a permanent threat to the airline industry. What happened then altered the psychology of flying for years. There´s no permanent damage to demand for air travel from the volcano crisis. Ultimately, this event will prove to have been just a hiccup," LBBW analyst Per-Ola Hellgren said.

Michael O´Leary, chief executive of Irish low-cost carrier Ryanair, expressed concern about talk of compensation.

"We´re definitely calling for suspension of these ludicrous passenger compensation rules, which entitle passengers, even those paying 20 or 30 euro airfares to reimburse their hotel expenses from airlines," he told the BBC this week.